The SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) and other gold exchange traded products had a nice, albeit brief run as market participants speculated the Federal Reserve would not raise interest rates.
Those days are gone. Following the Fed’s October meeting market observers have reconfigured rate hike expectations to December, a view that has is proving damaging for gold and bullion-backed exchange traded products.
Gold is seeing greater support from safe-haven demand after currency devaluations across Asia added to investment demand for a better store of value than paper currencies or stocks and bonds. Bullion was recovering lost ground after dropping to a five-year low last month on concerns that the Fed would hike rates as early as September. Obviously, a rate hike for 2015 can now only happen in December.
Although precious metals ETFs have recently displayed some strength, gold is still in a lengthy bear market, giving some traders pause about how much more near-term upside the yellow metal has in store. [Doubters in Gold Rally]
“Andrew Burkly, head of portfolio strategy at Oppenheimer, said gold could be useful as a short-term currency hedge or a long-term inflation hedge. However, given the strength in the dollar and low inflation, neither trade would be applicable, Burkly said,” reports CNBC.